JetBlue to Offload LiveTV Unit - Analyst Blog

In an attempt to reduce costs, JetBlue Airways Corp. JBLU has agreed to sell its in-flight entertainment subsidiary LiveTV to French defense electronics company Thales Group for $400 million. The all-cash deal, which is subject to regulatory approval and expected to close in mid-2014, send the stock price higher by 6 cents on Thursday trade on Nasdaq.

Melbourne, Fla. based LiveTV is a provider of satellite based television service, radio and movie programming service to commercial airlines and has been a subsidiary of JetBlue since 2002. It has 450 employees and Virgin Blue, Alitalia and Frontier and Southwest Airlines Co. LUV owned AirTran as its customers.

LiveTV is an integral part of JetBlue's popular on-board experience as it allows passengers to watch television 30,000 feet above ground. In 2013, the company introduced a Ka-band satellite based fast Internet service for airlines by collaborating with ViaSat Inc. VSAT.

New York based JetBlue announced that divesting the asset will reduce the operating expense and capital expenditure associated with running the subsidiary. Further, the company is getting a fivefold return on what it invested in 2002. However, JetBlue will enter into a long-term deal with LiveTV to keep using its in-flight entertainment system on its planes.   

The deal is a strategic one for Thales Group, which offers technological advancements for commercial carriers and aircraft manufacturers. The deal, if completed, will boost Thales position in the fast growing on-board entertainment business.

LiveTV, has so far been deprived from offering its service to JetBlue's rivals as selling the service to them would reduce the attractiveness of the carriers' differentiated in-flight entertainment products. However, LiveTV will be in a much better position under Thales to offer its service to other U.S. mainstream carriers and extend its reach.

JetBlue, which had previously hinted at exiting the business, will also benefit from the transaction. It will enrich the company's cash balance with which it can take delivery of its pending aircraft. Notably, JetBlue is expected to take delivery of 9 Airbus A321s in 2014.  

JetBlue currently carries a Zacks Rank #2 (Buy). American Airlines Group Inc. AAL, which carries a Zacks Rank #1 (Strong Buy), is also worth considering.